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Hi Paul,

Thank you for your very knowledgeable post!

As far as the gift tax issue...... I don't have a job, but I do have an income, and I do contribute to our finances.

You talk about "we have a healthy e-fund", "tax that we have to pay in January", and "we have until April 15 to contribute to the IRA". There is no "we" in any of this.

I know that it's his account and his taxes. When I say "we", what I mean is that I have until X date to send his money to his account. "We" just sounds so much nicer, so much more....couple-ish.

Of course the alternative would be to formalize your domestice partnership.(get married). This should be done this year so you don't get in trouble for gift tax.

We are getting married at a winery in Napa on April 26, 2003. I have been planning the wedding for the last 7 months, so it isn't going to get bumped up. But does the fact that I have income and do contribute negate this?

Now to your questions. On the tax issues, I would HIGHLY SUGGEST you get a tax professional to help you set up the business bookkeeping and first year taxes.

He does have an accountant, and we will meet with him before we send in the estimated tax. My biggest thing is...... how do I know how much needs to be set aside for taxes. I opened a separate ING savings account for the tax money, but what percent of the gross should I put in there? I've read form 505 and 560, and a bunch of others on the IRS website. I've looked at their forms til I feel like my head is about to explode. But all the formulas for figuring this stuff out assume that you already know how much you will make. They all start with you plugging in you AGI, and I have no way of knowing how much he will earn. He made nothing last month, this month he has made over $5,000. Next month he might make triple that, or he might make nothing, or anything in between. When we meet with the accountant in January, I don't want to find out that I haven't set aside nearly enough money.

BTW, I am very proud of him and what he is doing, check out his website at .

I'm a reasonably intelligent person, and other people do this stuff without having to run to an accountant every 3 months, so why can't I figure it out? I put "Taxes For Dummies" on hold at my local library, so maybe that will help.

Self employment tax is simply SS& Medicare tax that is normally deducted from your paycheck and matched and paid to the the IRS by and employer. When you become self employed you have to pay this yourself including the match.

I knew that we had to pay full boat on the SS and medicare, but I thought that the "self-employment tax" was something different. Thank you for clarifying that for me, that makes things a little easier!

As far as the conversion to a Roth, contribution to a Roth, contribution to a SEP issue, I guess what I'm asking is which will give us the most bang for the buck? If we can only do one, or only do two, which ones should we do this year?

If the conversion has to be done by December 31 to be on his 2002 taxes, I think we will do that first, because the others can be done up until April 15 for the Roth contribution, or til he files his taxes for the SEP.

If he does the SEP, that will lower his taxes for this year, but if he contributes to a Roth and or converts his traditional IRA to a Roth (we are waiting for the paperwork to roll the 401K to a Vanguard traditional IRA), then it isn't taxable upon withdrawl. Since he is 26 (almost 27) and that money will have 33 years to grow, should we do the Roth things first? On the other hand, if he contributes to a SEP, that will be pre-tax, so we could put more money in it, but it will get taxed after 33 years (or more) of growth.

Maybe I just answered my own question. Conversion to Roth first, Roth contribution second, and SEP contribution third. If it is at all possible to do all 3, we will, but if we can't I think that's the order we will do them in. If I'm making a mistake, please let me know!

Thank you!

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